Puerto Rico is in the news related to the debt crisis. It is associated to the debt amount which is owed by the Government of Puerto Rico. More than $70 billion of outstanding debt and a debt to GDP ratio of 68% is at stake. The island has borrowed money with the aid of issuing bonds, utilizing the funds to compensate for declining Government revenue, and pursuing the layoff of public workers. However, as of present it is not possible for the Puerto Rico government to pay back the investors. Hence, just recently the Supreme Court rejected the plea of utility companies restructuring the debts.
The downgrading by the US agencies
On February 4, 2014, the Standard & Poor’s company downgraded it to non investment grade. Standard & Poor is an American Financial services company. Via this financial company the General Obligation debt of Puerto Rico was downgraded one level below, the investment grade from BBB- to BB+. This was followed by Moody’s downgrading policy on February 7, 2014. They pursued the same from Baaa3 to Ba2. This was two levels below the investment grade. And lastly the downgraded process was pursued by Fitch Ratings. The latter downgraded the same on February 11, 2014. This time the downgrading of Puerto Rico’s GO debt pursued from BBB- to BB. This was again two levels below the investment grade. Fitch illustrated the reason for the downgrade as the liquidity concern as well as the lack of economic growth.
This no wonder enabled rather compelled Puerto Rico to repay some amount of debt instruments within months.